Someone on Twitter mentioned that index funds create alpha. I don’t know how is that possible but what is certainly possible is that you can create investment alpha with your own behaviour.
It is a known fact that the returns of an investment instruments (say mutual fund) and the actual return of an investor vary significantly.
Why is that?
I believe debt funds can play an important role in an investment portfolio. I just don’t know what and how. That’s where I reached out to Akhil Mittal, Senior Fund Manager – Fixed Income with Tata Mutual Fund. He is the expert and he was kind enough to share his views and help me learn more about debt funds.
Just to let you know, Akhil manages the following debt fund schemes at Tata MF.
He also manages debt portion of some hybrid funds (Tata Balanced Fund, Tata Young Citizens Fund, Tata Regular Savings Equity Fund, Tata Retirement Saving Fund – Moderate & Conservative Options, Tata MIP Plus Fund, Tata Young Citizens Fund and a few FMP’s for Tata Mutual Fund.
Here we go.
VK: Hi Akhil, this is going to be unlike any other conversation that you might have had before.
You are a debt fund manager, the specialist. I come to you as a layman to understand debt funds and how can I use them best. I have questions, which I want to ask you and get clarity about investing in debt funds. Can I?
AM: Sure, please go ahead.
VK: OK. Here’s the first and the obvious one. What role can a debt fund play in my portfolio, any investor’s portfolio?
In an earlier post, we built a winning equity mutual fund portfolio. This time we will look at debt mutual funds and see which ones can best deliver on your investment goals.
As I set out to select debt mutual funds, I realised this huge challenge staring at me. If selecting equity funds was like running a marathon, selecting debt mutual funds is akin to climbing Mount Everest.
Why?